The aim of this Paper is to provide a concise guide to Estate Duty Law as it affects policies of assurance and other contracts entered into by Life Offices in the course of their everyday business.

Part I, which is introductory, sets out the main enactments which render property liable to Duty, and covers such matters as aggregation and valuation of property.

The liability of various types of Life Policies to Duty is dealt with in Part II, special reference being made to policies effected under the Married Women's Policies of Assurance (Scotland) Act, 1880, and the Married Women's Property Act, 1882, and to Partnership and Nomination Policies.

Annuities of various types and their liability to Estate Duty are dealt with in Part III.

The treatment of Group Life Assurance and Pension Schemes and other superannuation benefits in Part IV is, of necessity, general in its nature, because of the great variety of such arrangements. An attempt has been made to select the main types and to discuss their liability to Estate Duty.

Part I of the paper considers in relation to Pension Funds the financial problems so much discussed in recent years in a Life Office context, viz:

(a) asset distribution by date and by class,

(b) financial options against the Fund,

and states the author's conclusions.

In Part II are presented investment statistics and other information relating to a number of actual Pension Funds whose investments comprise 25% of all non Local Government Funds, some £300,000,000 in 1964.

The main conclusions reached in the paper are:

(1) that, normally, irredeemable investments should predominate in a Pension Fund portfolio and include a considerable equity share element;

(2) that financial options exist, but are of far less potential danger to the Pension Fund than to the Life Office;

(3) that, in practice, the Funds investigated are invested shorter than the author would have expected but include a considerable and increasing equity element.

1. The Council of the Institute decided that “a Working Party be set up to advise the Council on the actuarial and other problems arising in connection with the transferability of pension rights ”. The Council of the Faculty accepted the Institute's invitation to be associated with the project and we were appointed to be the members of the Working Party.

The object of the paper is to examine the organisation of an average ordinary life office with a view to the introduction of a small-scale electronic computer operating from punched cards. For purposes of illustration and comparison a model office with 100,000 assurance policies in force operating under certain conditions has been assumed.

The general approach employed is:

(a) To examine the office system in current use,

(b) To consider what improvements may be made in the present system using normal punched card equipment where suitable, and,

(c) To discuss what further re-organisation would be required to make use of a computer and what advantages might be expected.

The paper is divided into three parts. Part I contains some brief remarks on North American experience and systems suggested for use there. In Part II, methods of maintaining policy records and the possibility of consolidation are discussed. Part III deals with the various services required from policy records, such as valuation and premium collection, and explores the practicability of using a consolidated policy record.

In the concluding remarks an attempt is made to assess the economics of using a small computer.

Included in the appendices is a brief description of a small-scale computer together with specimen card forms and a programme for carrying out a valuation.

The first part of the paper consists of a mathematical analysis of a method of ensuring solvency in an expanding life office investing only in first-class dated and irredeemable securities on the assumption that the market price structure of dated medium to long term securities may change only in such a way that at any time the gross redemption yield for any particular term to redemption will bear a constant ratio to the yield on irredeemables. This leads to a method of valuation of liabilities which is independent of any subjective estimate of the future rate of interest.

The second part of the paper suggests a possible use of this method of valuation in conjunction with the technique of Linear Programming as an aid to the management of a life assurance and annuity fund. This is illustrated by a worked example relating to investment policy, and applications to new business policy and “gearing” are discussed generally.